Building an investment portfolio usually involves careful decisions about risk, ownership, income and long-term objectives. However, many investors spend considerably more time choosing assets than deciding what should happen to those assets after death.
An estate plan helps connect investment decisions with succession arrangements. Without appropriate planning, executors and family members may face delays, uncertainty and disputes at a time when financial decisions are already difficult.
A will does not control every asset
A valid will is central to estate planning, but investors should not assume that every asset will automatically be distributed under it.
The treatment of an asset can depend on how it is owned. Property held jointly may pass directly to the surviving joint owner. Superannuation death benefits may be paid according to the fund’s rules and any valid nomination. Assets held through a trust or company may be governed by separate documents.
The first step is therefore to prepare a complete inventory that identifies:
- real estate;
- bank accounts and term deposits;
- shares, exchange-traded funds and managed investments;
- superannuation;
- interests in companies, partnerships and trusts;
- digital assets and cryptocurrency;
- insurance policies; and
- significant debts or guarantees.
Investors should then consider whether the ownership structure and estate-planning documents produce the intended outcome.
Holt & Macdonald’s guide on how to make a valid will in Victoria explains the principal requirements for a valid will, including testamentary capacity, signing, witnesses, executors and beneficiaries.
Choose the executor carefully
An executor may need to identify investments, obtain valuations, communicate with financial institutions, deal with taxation issues and decide when assets should be transferred or sold.
This can be demanding where an estate includes several properties, complex shareholdings or business interests. The person appointed should be trustworthy and organised, but also capable of obtaining professional assistance when required.
An executor should not distribute investments prematurely. Estate liabilities, administration expenses and possible claims must be considered first.
Probate may be required
Financial institutions will often require formal evidence of an executor’s authority before transferring substantial investments.
A grant of probate is issued by the Supreme Court and confirms the will accepted by the Court and the executor’s authority to administer the estate. Probate is not required for every estate, but it is commonly necessary where the deceased owned real property or significant financial assets in their sole name.
The guide explaining when probate is required in Victoria outlines the general application process and the circumstances in which institutions may request a grant.
Consider the risk of an estate dispute
Investors sometimes intend to leave different assets to different family members. One child may receive a property while another receives shares or cash. Although the values may appear comparable when the will is prepared, market movements, taxation consequences and outstanding debts can later produce an unequal result.
A person may also decide to exclude or make limited provision for a relative. In Victoria, an eligible person who believes that the deceased failed to make adequate provision for their proper maintenance and support may be able to bring a family provision application.
Holt & Macdonald’s overview of Part IV claims in Victoria explains eligibility, time limits, evidence and possible outcomes.
No estate plan can eliminate every risk of disagreement. However, clear drafting, appropriate advice and regular reviews can reduce avoidable uncertainty.
Review the plan as the portfolio changes
An estate plan prepared when an investor owns one property and a modest share portfolio may no longer be suitable after the acquisition of a business, interstate property or substantial retirement savings.
Reviews are particularly important following marriage, separation, divorce, the birth of a child, the death of a beneficiary or executor, or a major change in asset ownership.
Investment planning focuses on accumulating and preserving wealth. Estate planning determines how that wealth will be managed and transferred. Treating them as connected parts of the same strategy can provide greater certainty for both investors and their families.